The Labour Market

Question 1

Human Capital

Answer 1

The economic value of an individual’s skills and education

Question 2

Marginal Revenue Product (MRP equation)

Answer 2

This is the marginal revenue create for each extra unit of resource

MRP = MP x MR

Question 3

Elasticity of Demand for Labour

Answer 3

The responsiveness of the demand for labour to a change in the wage rate

Question 4

What is the Elasticity of Demand for Labour affected by

Answer 4

How much labour costs as a proportion of total costs - if labour costs are higher proportion, demand will be more elastic

Ease to substitute factors - demand is more elastic if more substitutes are available (capital or cheap labour)

PED of product - the more price elastic a product is, the more price elastic demand for labour is

Question 5

Factors that affect supply of labour

Answer 5

Wage Rate
Demographics of population - retirement, school leaving age
Migration
Leisure Time
Trade Unions - Employment Rights
Taxes and benefits
Training - limit if qualifications or training required

Question 6

Sticky Wages

Answer 6

Minimum wage causes reduction of wages to be harder/not possible so during recessions, firms would sack workers instead

Question 7

Monopsony Power

Answer 7

One buyer of labour in a market

Question 8

At what point does the imperfect labour market profit maximise

Answer 8

MC = MRP

Question 9

Trade Union

Answer 9

Organisation inside or outside of firm that values rights of workers

Question 10

Discrimination - Labour

Answer 10

Employers make decisions on wage rate and employment based on prejustice

Question 11

Types of Discrimination

Answer 11

Formal Education
Skills, Qualifications, Training
Pay Gaps - skilled and unskilled workers
Gender
Discrimination (age, race, ethnicity)